Calculate the economic profit of a company

What is the economic profit of a company if they have explicit costs of $950,000, implicit costs of $30,000, and revenue of $1,000,000? The economic profit of the company can be calculated by subtracting the total explicit costs and implicit costs from the revenue. In this case, the explicit costs are $950,000, the implicit costs are $30,000, and the revenue is $1,000,000. Let's calculate the economic profit.

To calculate the economic profit, we first need to add up the explicit costs and implicit costs. The explicit costs include labor expenses of $600,000, capital expenses of $150,000, and materials expenses of $200,000, totaling $950,000.

Next, we consider the implicit cost, which is the opportunity cost of using the firm's own land instead of renting it out. The annual rental value of the land is $30,000.

Now, let's calculate the economic profit:

Revenue: $1,000,000

Explicit costs: $950,000

Implicit costs: $30,000

Subtracting the total costs from the revenue:

$1,000,000 (revenue) - $950,000 (explicit costs) - $30,000 (implicit costs) = $20,000

Therefore, the economic profit of the company is $20,000.

← Kitchen knives employee pay calculation How to calculate bond coupons and purchase price using makeham formula →

More Posts: